PARIS --- A French Senate inquiry into the troubled A-400M airlifter program faults both governments and industry for the program’s long-running delays, but recommends that the 20 billion euro contract be renegotiated to avoid even more negative operational and industrial consequences.

The report also reveals for the first time that the A400M faces significantly greater obstacles than have previously been made public, including technical problems that have slowed development of its avionics, while delays in production deliveries are worse than previously acknowledged.

It also reveals that the program is theoretically subject to cancellation beginning in April, since delays in its first flight have exceed the contractual limit of 14 months.

“The contract foresees that if first flight is delayed by more than 14 months, governments can abandon the program and recover the funds they have paid,” the report says. “As first flight was initially scheduled for January 2008, this means that [cancellation] will become legally feasible by the early Spring 2009….in these conditions, the program’s future will be settled by April.”

The fact that cancellation is a real option, even if an unlikely one, is significant because it provides governments with a powerful bargaining weapon as EADS and Airbus press for renegotiation to escape heavy financial penalties.

The report, “L'Airbus militaire A400M sur le ‘chemin critique’ de l'Europe de la défense” (The A400M Military Airbus on the critical path for European defense) was jointly prepared by the Senate’s foreign affairs and finance committees, and released Feb. 10.

EADS and Airbus are trying to convince governments to amend technical specifications they now see as unrealistic, to reduce especially harsh penalty clauses, and to amend unfavorable price escalation clauses. “It is probable that, in the short and medium terms, the [current contract] will produce large losses” for industry, the report states.

France in not opposed to renegotiation, but Germany wants the contract to be completed as signed, while British Defense Secretary John Hutton has explicitly threatened to pull out as a delay of three to four years for initial deliveries is “unacceptable.” Other partner governments have not publicly stated their position. The Senate report cautions that “the rigid enforcement of the contract would ‘fragilize’ EADS,” the corporate parent of Airbus.

Airbus, however, says it is not seeking extra cash, and that the contract changes it seeks would not cost European taxpayers extra money, Chief Operating Officer Fabrice Brégier was quoted as saying by the French daily Les Echos on Feb. 11. “We are not asking for penalties to be lifted, but to be spread out over a new timetable that is both credible and binding," Brégier said.

The manufacturer’s position is that, since the responsibility for the delays is shared by governments and by subcontractors, it should not be alone in suffering the financial consequences.

The Senate report, the most exhaustive public audit of the program to date, spreads blame for the delays across all parties to the contract, and identifies inexperience at Airbus, excessive optimism by subcontractors, ineffective program management, and different and conflicting agenda pursued by partner governments as the root causes for the delays.

It also identifies the combined development and production contract, first signed in 2001 and amended in 2003, as “a recipe for failure” because it called for concurrent development of a new airframe, a new engine and new avionics; because it underestimated price and timescale; and because it lacked a risk reduction study. Together, these factors introduced unsustainable levels of risk, while contractual milestones were too tight and made no allowance for development delays.

It adds that EADS and Airbus also seriously underestimated the mass, the airframe stress factors and the complexity of mission systems for a tactical transport aircraft. Also, at the time Airbus was mainly focused on the A380 and on management in-fighting, while the program management structure was compromised by crossed lines of command and of responsibility, it adds.

Consequently, governments should bear part of the blame, the report states, for not having appointed a lead country to oversee the program, and for having assigned the program’s supervision to an executive agency, OCCAr, that had neither the management resources nor the authority to provide effective oversight. (OCCAr is the European organisation for joint armament cooperation, better known by its French name, Organisation Conjointe de Coopération en matière d’ARmement).

Other salient points of the Senate report include:

-- Delivery of the Full Authority Digital Engine Controls (FADEC), developed by the Hispano-Suiza unit of France’s Safran Group, is now tentatively scheduled for October 2009, assuming it obtains its civil certification in July. This is two years later than the contractual date of Oct. 30, 2007, and pushes delivery of the first A400M back to late 2012.

-- Delays in the navigation systems are at least as worrying as those of the engines. The Flight Management System (FMS), the GPS Air Data Inertial Reference System (GADIRS), the Terrain-Reference Navigation System (TRN) and the Terrain Masking Low Level Flight system (TM-LLF) all have experienced major development delay.

-- Empty weight will exceed specifications by 12 tonnes because of the airframe and mission systems are heavier than planned. However, EADS says payload will remain at 37 tonnes, which means landing performance may be degraded.

-- Only one or two aircraft will be delivered in 2013; delivery rates will only ramp up in 2014, and delays will not be fully caught up until 2020.

-- To speed deliveries, Airbus has offered to deliver an interim standard, which would not be capable of the more sophisticated flight modes, until avionics issues have been resolved. Delivered aircraft would subsequently be retrofitted to the full contractual standard.

-- The A400M’s unit price has increased from 110 million euros at 1998 prices to 145 million euros at today’s prices.

--- To date, partner governments have paid 5 billion euros into the program; Airbus has so far posted losses equivalent to 8% of this amount;

-- Governments refused to pay an extra 500 million euros for risk the reduction studies requested by industry, and Airbus Military says this led to development problems regarding the horizontal tail surfaces, the definition of the wing design, and weight estimates.

-- OCCAr, the international agency which manages the A400M program on behalf of participating governments, has been tasked with an audit whose conclusions should be completed by the end of February.

Several of these points had been cited by EADS Chief Executive Officer Louis Gallois in mid-January, when he went public with the company’s wish to renegotiate the contract, but had not been independently confirmed before this report.

Click here for the full report (in French; 95 pages in PDF format) on the French Senate website.